IR35 – Off Payroll Working April 2020 and potential impact for advisory firms (continued)
SUMMARY All of the issues above have to some extent been considered by employment tribunals, and the only trend generally appearing is that each case is fact-specific. The same issues continue to be challenged in court in IR35 cases brought by HMRC, and there has been both high profile wins and losses for HMRC. These cases demonstrate that there is no certainty on employment status, nor how this will be viewed by HMRC and the courts. Below are some practical considerations to take into account to try and limit any exposure to the IR35 test or employment status: • Include a right of substitution within the contract. This should be drafted so that it is as wide-ranging as possible and should not be subject to an excessively-wide veto on the part of the principal. If the right is actually exercised in practice, this will help to demonstrate that there is no requirement of personal service. Due to the regulatory nature of your work, this step may be difficult to achieve. If there is more than one adviser in the firm, the right of substitution could be achieved through allowing the other adviser to perform the work, or through a locum. • Avoid an obligation to provide and accept work. This means as principal, you should not create an obligation on yourself to provide leads, nor place an obligation on your adviser to accept the leads from you. • The adviser should be subject to as little control as possible. For example, the adviser should, if possible, be free to set their own hours and place of work and to determine how the work is done. In the regulated environment, this issue is difficult to achieve where there are strict rules and processes in place determined by the FCA. Notwithstanding, the less control you as principal set regarding matters such as working hours, time off, uniform etc. points further away from employment/ worker status.
• The worker should not be integrated into the company more than is absolutely necessary. For example, the worker should not be held out as a member of the company, should not be subject to its policies and procedures, and should not be entitled to participate in employee-type benefits. • If possible, require the intermediary to provide their own equipment, rather than providing this to them. • Although not determinative, it is still helpful to state in the contract that the relationship is not intended to be one of employment. The IR35 legislation and off-payroll working rules deal with the tax treatment applied by HMRC. It is entirely possible that HMRC will determine that a person is an employee for tax purposes, but an employment tribunal may not make such finding. However, the tests used to determine this issue are largely the same. The responsibility for determining the employment and tax status of your advisers is that of the directors or principals of the firm. Where you are in any doubt in respect of these issues, we strongly recommend that you seek independent legal and tax advice. WHAT SHOULD FIRMS DO NOW? Consider whether the rule changes apply to the firm and, if so, consider whether any off payroll workers should be treated differently from 6th April 2020.
DO YOU NEED FURTHER HELP OR SUPPORT? If you have concerns about being compliant, get in touch with TenetSelect, the directly authorised regulatory experts, by calling 0800 085 0825. We have a wide range of services to help your firm, and we would love to have a chat to tell you more. Regulation Matters is produced by TenetSelect as guidance only and is based on their interpretation, it is not and should not be relied upon as professional or legal advice. TenetSelect does not accept any liability for any losses arising directly or indirectly in connection with any of the information contained within Regulations Matters to the extent it can be excluded by law.
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